Certainly Uncertain

December 13, 2010

Money-Guy 12-13-2010

As is usually the case, the holiday season has caused our bi-weekly schedule to be slightly off. You could probably even say that the frequency at which we get these podcasts published during the holidays is somewhat “uncertain” (you will see how clever this statement is as you read on… : -)

In today’s show, we touch on a subject that EVERYONE in this country can relate to right now… uncertainty!

  • Will tax rates go up?
  • Will the tax cuts expire?
  • What will the death tax be?
  • How much is a taxable estate?
  • What is going to happen to capital gains?
  • How do I invest?
  • Should I stay in equities and “ride the roller coaster”?
  • Should I move to cash for the safety but earn nothing?
  • Is there really going to be a bond bubble?

These are just a few questions that are circulating up in Washington, in the media, and even at the water cooler. Oddly enough, right now the answer to all of them is the same: who knows? Well, when you have these “who knows” type of questions, how do you plan for the future? To start off the show, we share a listener email that expresses this exact concern and we give you the Preston & Cleveland rationale of how (from an investment stand point) you should think about this current market environment.

We go on in the show to share a little case study experiment we conducted. Because I have a background in accounting and I am a CPA by training, I still do a handful of tax returns each year (about 52 to be exact). I thought it would be very interesting to break out those 52 returns by Adjusted Gross Income and then take a look at each group’s effective tax rate (in an attempt to see if there is any weight to the “rich people don’t pay taxes” theory). I then determined which of these clients were business owners and even took that a step farther to see how many individuals they employ (to see if small business owners really are employing that many people). Here are my results:

  • Of the 52 returns, 19 had AGIs under $100k, 25 between $100k and $250k, and 8 clients  over $250k.
  • The average AGI of clients below $100k was $50,700 and their effective tax rate was 9.6%
  • The average AGI of clients between $100k and $250k was $150,600 and their effective tax rate was 18.4%
  • The average AGI of clients above $250k was $615,000 and their effective tax rate was 26.2%

What this says to me is that high income earners pay more in taxes (in percentage terms) than lower income earners. I found the following statistics even more compelling:

  • Of the 19 individuals below $100k AGI, 2 of them were business owners and they collectively employed 16 people.
  • Of the 25 individuals between $100k and $250k AGI, 3 of them were business owners and collectively employed 8 people.
  • Of the 8 individuals over $250k, 5 of them were business owners and employed 112 people.

To me (at least for my small sample of the American population) this says that there is some truth to the fact that business owners making over $250k really do employ a lot of people. As you listen, we will go even deeper into these numbers and explain some other conclusions we were able to draw from this very simple analysis.

Most Recent Episodes

3 WORST Types of Financial Crooks (Don’t Get Scammed!)

In the financial world, there are a lot of crooks that try to get into your pockets. From metaphorical crooks selling a bad product to literal crooks stealing your money, we'll cover the different types of financial crooks to watch out for and how you can protect...

Financial Advisors React to NFL Players Spending Their First Million!

Not many Americans will ever make over one million dollars in a year, but professional athletes regularly make that and more. In this react video, we'll see how NFL players spent their first million dollars after making it into the league. As we review their mistakes...

Everything You Need to Know About Real Estate Investing!

Over the years, we have had some great conversations about real estate investing. In this episode, we put together the ultimate guide to show you everything you need to know about real estate investing! In this episode, you'll learn: How to get started in real estate...

The Truth About The FIRE Movement! (Is FIRE Still Possible?)

Since the advent of the FIRE movement several decades ago, we have never experienced a period of higher inflation until now. With the market down over 20% and inflation at 40-year highs, is FIRE still possible in 2022? If it is, what does it take to become financially...

Top 3 Most Controversial Money Issues! (Our Hot Takes)

We have some unpopular opinions about controversial money topics. In this episode, we'll discuss our three biggest controversial hot takes, including our thoughts on nice cars, wealthy people, and real estate. You won't want to miss this one! In this episode, you'll...

Why College in America is Broken [And What You Can Do About It]

College costs in America have skyrocketed over the last few decades, as has the total student loan debt in the country. In this episode, we'll talk about why college in America is broken, what went wrong, and how you can do college the right way. In this episode,...

Why This Recession is Going to Be VERY Different!

Every recession is different, and this one is no exception: we are currently experiencing once-in-a-lifetime inflation and started the recession with historically low interest rates. Will this recession be different from any other we've experienced? How will it end...

How to Protect Your Finances During a Recession! (By Age)

The S&P 500 recently crossed over into bear market territory, and many in the financial media believe we are in a recession. Bear markets and recessions affect everyone differently, and we think there are certain things you need to focus on (or forget about) by...

Avoid These Home Buying Mistakes! (Even During a Crazy Market)

Housing prices have gone up over 30% in the last two years, and over 70% when you account for rising interest rates. However, there are some glimmers of hope in the housing market for those looking to buy. Will the market cool off anytime soon? How can you buy a house...

Financial Advisors React to OUTRAGEOUS Money Advice on TikTok!

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and Tik Tok is the new frontier. Is there good...

Financial strategies to your inbox!

Never miss a show again, get special offers and early access. Ready to build wealth and start owning your time? 

You have Successfully Subscribed!